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Goldman Sachs Study Says Companies With More Women Managers Outperform Those Led By Men

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In our world timeline right now, we’re inching closer to that sweet spot where we recognise what women can achieve when ushered into leadership positions. We’ve been seeing it on a corporate level for some time now, and lately even on the political front, with countries led by women faring much better during this coronavirus pandemic than those led by men. But in case you still have some doubts about more female representation in senior management of corporates, then take it from Goldman Sachs, it’s a great idea. They conducted a study of European companies, and concluded that companies with more women managers were more successful than those only led by men.

Guess two X chromosomes are better than one, eh? (Sorry, bad joke)

Sharon Bell, a Goldman Sachs European equity strategist, recently revealed about this study in an op-ed for the Financial Times. Goldman Sachs analysed data since the 2008 recession for Stoxx 600 companies. It found that the companies that were at the top quarter of their respective sectors with more female managers or board members had their share prices rise on an average of 2.5% per year when compared to those in the bottom quarter.

“Having a greater proportion of women in senior positions is not just a diversity score to target or a box to be ticked, but is associated with a lower cost of equity, stronger share-price performance and lower volatility of shares, too. Good news for corporations, investors and society.”

The study reports that the results for the pandemic period have not been as inclined toward the above proposition. This could possibly be because service sectors, which are known to have a higher instance of female employment than others, have been the worst hit by the resultant economic crisis.

Also Read: Female-Led Workplaces Have So Much Potential, If Only We Could Get Rid of Toxic Femininity. Why Do Women Bully Women?

So is the Goldman Sachs study saying hiring more women managers ‘causes’ companies to succeed?

Erm, not exactly. There’s no ‘causal’ relationship here, as Bell clarified in her editorial. There could be a lot of other factors that contribute to the companies’ success. For example, it could be that having a diverse pool of employees helps the company come up with a wider scope of ideas compared to their male-only counterparts. Because they don’t just limit themselves to hiring men, they have access to a wider skill set.

There could also be a reverse causal effect, where more women tend to choose to work only in companies that perform better in general. Ergo, this means that companies with more female management would indicate their robustness in other quality-related aspects such as infrastructure, income stability. And that of course, would ensure the company remained at the top of its order in terms of functionality.

Bell also remarked that most of these top companies with a higher share of women performed well on metrics that have a correlation with environmental, social and governmental factors. Since there has been a large flow in to ESG funds, the higher share prices of these companies could be reflecting this boost.

There’s a fear that post-pandemic, female employees might not be as readily hired as male ones. This one finding might just change that.

The Goldman Sachs study also evaluated these top quarter companies with more women employees for their very basic corporate performance metrics like ROE and revenue growth. Turns out, while having more women on top didn’t exactly make them over perform, it didn’t mean they underperformed either. Which means, if employers are worried that hiring more women in seniority positions would somehow increase their cost-to-company, then that’s not been the case at all.

We’re still far away from the acceptable ratio of women managers to men managers

People set a lot store by numbers. So if the above numbers don’t look that promising, you could tell them that equality is as good a reason as any to hire more women on senior levels. However, we’ve a long way to go to make that happen. For starters, even in the industry sectors that have more female employees than male employees, the study found that the number of female managers are still below 50%.

It seems like our work is cut out for us, then? Hiring (or promoting) more women to managerial positions might actually be a good idea. The companies could benefit from this diversity in thoughts, ideas and skill sets, which is bound to give them an edge over companies that choose to be stuck in more orthodox value systems.

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